By Corrie Driebusch, Douglas MacMillan and Telis Demos
Shares of Box Inc. rose 66% in their market debut Friday on the
belief that the company can grow beyond the commodity business of
online storage and into a more lucrative suite of tools tailored
for industries such as health care and retail.
The stock--which trades under the symbol BOX--opened at $20.20
on the New York Stock Exchange, rose as high as $24.73 and closed
at $23.23, up 66% from its initial public offering price of $14.
Box sold 12.5 million shares at the $14 IPO price, which was above
the expected price range of $11 to $13.
The initial pricing pegged Box's market capitalization at
roughly $1.6 billion and raised $175 million in proceeds that will
help the company support a high-cost business model dependent on
sales and marketing.
Friday's stock-market debut comes roughly 10 months after the
company publicly filed for an IPO. Those plans were postponed amid
tepid demand for cloud-computing stocks, and in the ensuing months
it turned to the private market to raise additional funding.
Box's success as a public company will hinge on its ability to
differentiate its offering amid increasing competition from tech
giants like Microsoft Corp. and Amazon.com Inc., who have used
their heft to offer online storage at ever-lower prices.
To do that, the 10-year-old company has built and acquired new
tools to make it easier for employees within an organization to
retrieve files and collaborate on documents. As it builds more of
these tools, Box can go out to its customers and sell them more
advanced services, said Forrester Research analyst Rob
Koplowitz.
"That's a perfectly viable model, assuming you get the upsell,"
said Mr. Koplowitz.
Box hopes to specialize in areas such as medicine. Last year, it
acquired MedXT, an imaging technology that lets customers render
and annotate medical images. Box has poached veteran executives
from industries such as health care, law, retail and media to lead
the company's expansion in those areas.
Chief Executive Aaron Levie said in December that his company is
"just a couple months" into its strategy of building different
services that cater to the unique needs of several different
industries.
"We're starting to see that in each industry, the way you use
data, the way you use information, the really transformational ways
you use the cloud tend to be fairly different," Mr. Levie said.
The glare of Wall Street and growing pressure from competitors
will challenge the company to move quickly.
Microsoft is going after Box with a beefed-up offering for its
file-storage service OneDrive for Business, which offers enough
storage space for roughly 200 high-definition digital movie
downloads--at a lower monthly cost than Box. Amazon.com last summer
also made available a Box-like service called Zocalo that the
Seattle company has offered free for companies that buy Amazon's
"virtual" computers for employees.
David Rudow, a senior equity research analyst at Thrivent Asset
Management, said that while he believes Box has a first-mover
advantage in cloud storage, he worries about the pressure the
company could get from bigger players.
"It will be critical for Box to see how they differentiate
themselves from everyone else and how they get out of the Microsoft
shadow," he said.
Box will also need to show it can rein in costs over time
without eating into growth. The company's loss in the third quarter
ended Oct. 31 narrowed to $45.4 million from $51.4 million a year
earlier, partly because of lower sales and marketing costs. But
revenue growth slowed to 70% from 81% in the previous quarter.
Despite the concerns, the company's financing round over the
summer valued Box at about $2.4 billion, according to Box's
filings.
The largest investor in Box is venture-capital firm Draper
Fisher Jurvetson, which will own a 19.2% stake valued at $322.5
million. Mr. Levie's stake after the offering is 3.4%, worth about
$57.2 million.
Box's IPO is being led by Morgan Stanley, Credit Suisse Group AG
and J.P. Morgan.
Shira Ovide contributed to this article.
Write to Corrie Driebusch at corrie.driebusch@wsj.com, Douglas
MacMillan at douglas.macmillan@wsj.com and Telis Demos at
telis.demos@wsj.com
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